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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2002
------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO _____________
COMMISSION FILE NO. 000-23529
---------
I.R.S. Employer Identification No. 22-678474
THE WILLOWBRIDGE FUND L.P.
(a Delaware Partnership)
4 Benedek Road,
Princeton, New Jersey 08540
Telephone 609-921-0717
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
--- ----
THE WILLOWBRIDGE FUND L.P.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements ...............................................3
Interim Condensed Statements of Financial Condition
as of September 30, 2002 (Unaudited) and December 31, 2001..........3
Unaudited Interim Condensed Statements of Income (Loss) for
the Three Months Ended September 30, 2002 and 2001
and for the Nine Months Ended September 30, 2002 and 2001...........4
Unaudited Interim Condensed Statement of Changes in Partners'
Capital for the Nine Months Ended September 30, 2002................5
Notes to Unaudited Interim Condensed Financial
Statements..........................................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................9
Item 3. Quantitative and Qualitative Disclosures About Market Risk.........13
Item 4. Market Price of and Dividends on the Registrant's Common
Equity and Related Stockholder Matters.............................14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..................................................15
Item 2. Changes in Securities and Use of Proceeds..........................15
Item 3. Defaults Upon Senior Securities....................................15
Item 4. Submission of Matters to a Vote of Security Holders................15
Item 5. Other Information..................................................15
Item 6. Exhibits and Reports on Form 8-K...................................15
2
PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
THE WILLOWBRIDGE FUND L.P.
INTERIM CONDENSED STATEMENTS OF FINANCIAL CONDITION
AS OF SEPTEMBER 30, 2002 (Unaudited) AND DECEMBER 31, 2001
- ---------------------------------------------------------------------------------------
September 30, December 31,
2002 2001
ASSETS
EQUITY IN COMMODITY FUTURES TRADING ACCOUNT:
Due from broker $27,085,549 $19,307,320
Net unrealized appreciation on open positions 3,122,046 3,470,476
----------- ------------
30,207,595 22,777,796
CASH IN BANK 2,071,078 3,332,403
PREPAID EXPENSES 64,362 -
ACCOUNTS RECEIVABLE 58,860 -
INTEREST RECEIVABLE 10,101 11,372
----------- ------------
TOTAL ASSETS $32,411,996 $26,121,571
=========== ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accrued Incentive Fees $ 1,421,058 $ -
Redemptions Payable 435,610 183,099
Accrued Management Fees 80,586 66,073
Prepaid Subscriptions 26,786 61,887
Sales Commissions 7,190 240
Accounts Payable - 15,628
Other Accrued Expenses 21,280 50,000
------------ ------------
1,992,510 376,927
PARTNERS' CAPITAL:
Limited partners (4,588.7029 and 5,596.2849
fully redeemable units at September
30, 2002 and December 31, 2001, respectively) 29,651,342 24,946,122
General partner (118.8740 and 179.1362 fully
redeemable units at September 30,
2002 and December 31, 2001, respectively) 768,144 798,522
----------- ------------
30,419,486 25,744,644
TOTAL LIABILITIES AND PARTNERS' CAPITAL ----------- ------------
$32,411,996 $26,121,571
=========== ============
NET ASSET VALUE PER UNIT
(Based on 4,707.5769 and 5,775.4211 units
outstanding at September 30, 2002 and
December 31, 2001, respectively) $ 6,461.81 $ 4,457.63
============ ===========
See Notes to Unaudited Interim Condensed Financial Statements
3
THE WILLOWBRIDGE FUND L.P.
UNAUDITED INTERIM CONDENSED STATEMENTS OF INCOME (LOSS)
- --------------------------------------------------------------------------------------------------------------------------------
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
INCOME:
Gains (Losses) on trading of commodity
futures, forwards and options:
Realized gains (losses) on closed positions $13,289,203 $(3,008,696) $14,345,598 $ 1,371,499
Net change in unrealized gains/losses on open
positions (7,253,789) 2,859,312 (348,430) (3,499,778)
----------- ----------- ----------- ------------
Total trading profits (losses) 6,035,414 (149,384) 13,997,168 (2,128,279)
Interest income 126,229 178,942 306,626 846,030
----------- ----------- ----------- ------------
Total income (loss) 6,161,643 29,558 14,303,794 (1,282,249)
EXPENSES: ----------- ----------- ----------- ------------
Incentive fees 1,421,057 - 2,138,560 498,003
Brokerage commissions 288,128 217,423 705,400 686,814
Management fees 144,502 131,118 398,709 402,053
Administrative expenses 44,796 57,146 124,500 168,758
----------- ----------- ----------- ------------
Total expenses 1,898,483 405,687 3,367,169 1,755,628
----------- ----------- ----------- ------------
NET INCOME (LOSS) $ 4,263,160 $ (376,129) $10,936,625 $ (3,037,877)
=========== =========== =========== ============
NET INCOME (LOSS):
Limited partners $ 4,164,059 $ (362,361) $10,669,215 $ (2,924,749)
=========== =========== =========== ============
General partner $ 99,101 $ (13,768) $ 267,410 $ (113,128)
=========== =========== =========== ============
NET INCOME (LOSS) PER UNIT $ 835.10 $ (65.11) $ 2,004.18 $ (525.89)
=========== ============ =========== ============
See Notes to Unaudited Interim Condensed Financial Statements
4
THE WILLOWBRIDGE FUND L.P.
UNAUDITED INTERIM CONDENSED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
- -------------------------------------------------------------------------------------------------------------------------------
Total
General Partner Limited Partners Partners'
Units Amount Units Amount Capital
---------------------------- ------------------------------ ----------------
PARTNERS' CAPITAL, DECEMBER 31, 2001 179.1362 $ 798,522 5,596.2849 $ 24,946,122 $ 25,744,644
Additions 3.8171 17,246 354.2897 1,576,798 1,594,044
Redemptions (64.0793) (315,034) (1,361.8717) (7,540,793) (7,855,827)
Net income - 267,410 - 10,669,215 10,936,625
---------- ---------- ---------- ------------- --------------
PARTNERS' CAPITAL, SEPTEMBER 30, 2002 118.8740 $ 768,144 4,588.7029 $ 29,651,342 $ 30,419,486
========== ========== ========== ============= ==============
See Notes to Unaudited Interim Condensed Financial Statements
5
THE WILLOWBRIDGE FUND L.P.
NOTES TO UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. GENERAL
The accompanying unaudited interim condensed financial statements have been
prepared pursuant to the rules and regulations for reporting on Form 10-Q.
Accordingly, certain information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements are not included herein. Interim statements are
subject to possible adjustments in connection with the annual audit of the
Partnership's financial statements for the full year. In the Partnership's
opinion, all adjustments necessary for a fair presentation of these interim
statements have been included and are of a normal and recurring nature.
2. ORGANIZATION
The Willowbridge Fund L.P. (the "Partnership"), a Delaware limited
partnership, was organized on January 24, 1986. The Partnership is engaged
in the speculative trading of commodity futures contracts, options on
commodities or commodity futures contracts and forward contracts. The
General Partner, Ruvane Investment Corporation ("General Partner"), is
registered as a Commodity Pool Operator and a Commodity Trading Advisor
with the Commodity Futures Trading Commission. The General Partner is
required by the Limited Partnership Agreement, as amended and restated (the
"Agreement") to contribute an amount equal to one percent of the aggregate
capital raised by the Partnership. The Agreement requires that all
subscriptions are subject to a one percent administrative charge payable to
the General Partner.
The Partnership shall end on December 31, 2006 or earlier upon withdrawal,
insolvency or dissolution of the General Partner or a decline of greater
than fifty percent of the net assets of the Partnership as defined in the
Agreement, or the occurrence of any event which shall make it unlawful for
the existence of the Partnership to be continued.
3. SIGNIFICANT ACCOUNTING POLICIES
Due from Broker - Due from broker represents cash required to meet margin
requirements and excess funds not required for margin that are typically
invested in 30-day commercial paper and U.S. Treasury bills which are
carried at cost plus accrued interest, which approximates market.
Prepaid expenses - Prepaid expenses represents the fiscal year 2002
management fee paid by the Partnership to the General Partner in January
2002. This amount is being amortized (straight-line) by the Partnership over
the twelve-month period ending December 31, 2002. As of September 30, 2002,
approximately $193,085 had been amortized by the Partnership.
Revenue Recognition - Investments in swaps, commodity futures, options
and forward contracts are recorded on the trade date and open contracts are
recorded in the financial statements at their fair value on the last
business day of the reporting period. The difference between the original
contract amount and fair value is recorded in income as an unrealized gain
or loss. Fair value is based on quoted market prices. All commodity
futures, options and forward contracts and financial instruments are
recorded at fair value in the financial statements.
Securities which are traded on a national securities exchange in the
United States of America are valued at their last reported sales price on
the date as of which the value is being determined on the national
securities exchange on which such securities are principally traded
provided that such sales price is between the closing "bid" and the "ask"
prices. If there are no sales on such date on such exchange or if the last
sales price is not between the "bid" and the "ask," such securities are
valued at the mean between the "bid" and the "ask" prices at the close of
trading on such date on such exchange.
6
Securities not traded on a national securities exchange in the United
States of America, but traded over-the-counter, are valued at their last
reported sales price on the date as of which the value is being determined;
provided that such sales price is between the closing "bid" and "ask"
prices. If sales are not reported, or there are no sales on such date, or
if the last sales price is not between the "bid" and the "ask" prices, such
securities are valued at the mean between the "bid" and the "ask" prices at
the close of trading on the date as of which the value is determined, as
reported by the NASD Automated Quotations System ("NASDAQ").
Commissions - Commission charges are based on a percentage of the net asset
value of the Partnership at the beginning of the month. The commission rate
charged is 3.5 percent annually of the net asset value of the Partnership.
Statement of Cash Flows - The Partnership has elected not to provide a
Statement of Cash Flows as permitted by Statement of Financial Accounting
Standards No. 102, Statement of Cash Flows- Exemption of Certain Enterprises
and Classification of Cash Flows from Certain Securities Acquired for
Resale.
Allocation of Profits (Losses) and Fees - Net realized and unrealized
trading gains and losses, interest income and other operating income and
expenses are allocated to the partners monthly in proportion to their
capital account balance, as defined in the Agreement.
The General Partner was paid a management fee equal to approximately one
percent of the net assets of the Partnership (as defined in the Agreement)
as of the last day of the previous fiscal year-end. Such annual fees
amounted to $257,446 and $277,033 for the year 2002 and 2001, respectively.
Willowbridge Associates Inc., ("Willowbridge") the Commodity Trading
Advisor ("CTA") of the Partnership is entitled to an incentive fee based on
an increase in the adjusted net asset value of the allocated assets of the
Partnership. The CTA receives 25% of any new profits, as defined in the
Agreement. The term "new profits" is defined as the increase, if any, in
the adjusted net asset value of the allocated assets. In addition, the
Partnership pays the CTA a quarterly management fee of 0.25% (1% per year)
of the net asset value of the Partnership.
Administrative Expense - Administrative expenses include professional fees,
bookkeeping costs, and other charges such as registration fees, printing
costs and bank fees.
Income Taxes - Income taxes have not been provided in the accompanying
financial statements as each partner is individually liable for taxes, if
any, on his/her share of the Partnership's profits.
Redemptions - Limited partners may redeem some or all of their units
at net asset value per unit as of the last business day of each month on at
least ten days written notice to the General Partner.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
7
Recently Issued Accounting Pronouncements - In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and
Hedging Activities", effective for fiscal years beginning after June 15,
2000, as amended by SFAS No. 137. SFAS No. 133 is further amended by SFAS
No. 138, which clarifies issues surrounding interest rate risk, foreign
currency denominated items, normal purchases and sales and net hedging.
This Statement supercedes SFAS No. 119 "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments" and SFAS No.
105 "Disclosure of Information about Financial Instruments with Off-Balance
Sheet Risk and Financial Instruments with Concentrations of Credit Risk"
and amends certain disclosure requirements of SFAS No. 107 "Disclosure
About Fair Value of Financial Instruments". The adoption of SFAS No. 133,
as amended, as of January 1, 2001, did not have a significant effect on the
financial statements.
In December 2000, the American Institute of Certified Public Accountants
issued an updated Audit and Accounting Guide - Audits of Investment
Companies (the "Guide") which is effective for fiscal periods beginning
after December 15, 2000. The Guide establishes new financial reporting
requirements for investment companies, including the disclosure of
financial highlights for the latest operating period. The Partnership has
presented this information in the Footnote 4.
4. FINANCIAL HIGHLIGHTS
The following sets forth the financial highlights for the nine months ended
September 30, 2002 and the year ended December 31, 2001.
2002 2001
Per Share Operating Performance
Net Asset Value. Beginning of the period $ 4,457.63 $ 5,061.73
------------ -------------
Gain from investment operations
Net investment loss (1) (560.86) (231.59)
Net realized and change in unrealized
gain/loss on investments 2,565.04 (372.51)
------------ -------------
Total from investment operations 2,004.18 (604.10)
------------ -------------
Net Asset Value. End of the period $ 6,461.81 $ 4,457.63
============ =============
Total Return (2) 44.96% - 11.93%
============ =============
Ratios/Supplemental Data
Ratio of expenses to average net assets - 12.84% - 8.26%
Ratio of net investment loss (1) to - 11.67% - 4.52%
average net assets
(1) Net investment loss is comprised of interest
income and total expenses
(2) Total return is derived as opening net
asset value less ending net asset value
divided by opening net asset value
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The Willowbridge Fund L.P. (the "Partnership") is engaged in the
speculative trading of commodity futures contracts, options on commodities
or commodity futures contracts and forward contracts. The objective of the
Partnership is the appreciation of its assets through speculative trading.
Ruvane Investment Corporation is the General Partner of the Partnership (the
"General Partner") and Willowbridge Associates Inc. is the Partnership's
trading advisor (the "Advisor").
The success of the Partnership is dependent upon the ability of the Advisor
to generate trading profits through the speculative trading of commodity
interests sufficient to produce capital payments after payment of all fees
and expenses. Future results will depend in large part upon the commodity
interests markets in general, the performance of the Advisor, the amount of
additions to and redemptions from the Partnership and changes in interest
rates. Due to the highly leveraged nature of the Partnership's trading
activity, small price movements in commodity interests may result in
substantial gains or losses to the Partnership. As a result of these
factors, the Partnership's past performance is not indicative of future
results and any recent increases in net realized or unrealized gains may
have no bearing on any results that may be obtained in the future.
Summary of Critical Accounting Policies
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP")
requires management to adopt accounting policies and make estimates and
assumptions that affect amounts reported in the Partnership's financial
statements. The critical accounting policies and related judgements
underlying the Partnership's financial statements are summarized below. In
applying these policies, management makes judgments that frequently require
estimates about matters that are inherently uncertain. The Partnership's
significant accounting policies are described in detail in Note 3 of the
Notes to the Unaudited Interim Condensed Financial Statements.
The Partnership records all investments at fair value in its financial
statements, with changes in fair value reported as a component of Trading
Profits (Losses) in the Statements of Income (Loss). Generally, fair
values are based on quoted market prices; however, in certain
circumstances, significant judgments and estimates are involved in
determining fair value in the absence of an active market closing price.
9
Results of Operations
Comparison of Three Months Ended September 30, 2002 and 2001
For the quarter ended September 30, 2002, the Partnership had net trading
profits comprised of $13,289,203 in realized gains on closed positions,
$(7,253,789) in net change in unrealized gains/losses on open positions and
$126,229 in interest income. For the same quarter in 2001, the Partnership had
net trading gains comprised of $3,008,696 in realized losses on closed
positions, $2,859,312 in net change in unrealized gains/losses on open
positions and $178,942 in interest income.
In July 2002, trading was most profitable in financials. The losses in foreign
currencies failed to offset these gains. The Partnership recorded a loss of
$1,430,858 or $286.89 per unit. In August 2002, trading was most profitable in
financials. The losses in foreign currencies did not offset these gains. The
Partnership recorded a gain of $1,294,641 or $272.28 per unit. In September
2002, trading was profitable in financials. The losses in foreign currencies
did not offset these gains. The Partnership recorded a gain of $1,537,661 or
$326.64.
In July 2001, trading was unprofitable in foreign currencies, tropicals and
energy. The Partnership recorded loss of $1,552,179 or $294.36 per unit during
July 2001. In August 2001, trading was profitable in financials and foreign
currencies. The Partnership recorded a gain of $1,609,783 or $289.42 per unit
during August 2001. In September 2001, trading was unprofitable in energy and
foreign currencies. The Partnership recorded a loss of $395,180 or $68.41 Per
unit during September 2001.
For the quarter ended September 30, 2002, the Partnership had expenses
comprised of $1,421,057 in incentive fees, $288,128 in brokerage
commissions (including clearing and exchange fees), $144,502 in management
fees and $44,796 in administrative expenses. For the same quarter in 2001,
the Partnership had expenses comprised of $217,423 in brokerage commissions
(including clearing and exchange fees), $131,118 in management fees and
$57,146 in administrative expenses. Incentive fees are based upon quarterly
profits. As the quarterly profits increased during the quarter ended
September 2002, the trading losses from prior quarters were recouped and
incentive fees were earned by the Commodity Trading Advisor. The incentive
fees were not generated for the quarter ended September 2001 as trading
losses from prior quarters were not recouped. Brokerage commissions and
management fees vary primarily as a result of changes in assets under
management. As the assets under management increased in the quarter ended
September 30, 2002, as compared to quarter ended September 30, 2001,
brokerage commissions and management fees also increased for the three
months period. Administrative fees consist primary of legal and other
expenses relating to the Partnership's reporting requirements under the
Securities Exchange Act of 1934, as amended.
As a result of the above, the Partnership recorded a profit of $4,263,160 or
$835.10 per unit for the quarter compared to a loss of $376,129 or $65.11 per
unit for the same quarter in 2001.
At September 30, 2002, the net asset value of the Partnership was
$30,419,486 compared to its net asset value of $25,744,644 at December 31,
2001. The net asset value per unit at September 30, 2002 was $6,461.81
compared to $4,457.63 at December 31, 2001.
During the quarter, the Partnership had no credit exposure to a counterparty
that is a foreign commodities exchange or to any counterparty dealing in over
the counter contracts which was material.
10
Comparison of Nine Months Ended September 30, 2002 and 2001
For the nine months ended September 30, 2002, the Partnership had trading
profits comprised of $14,345,598 in net realized gains on closed positions,
$(348,430) in net change in unrealized gains/losses on open positions and
$306,626 in interest income. For the same nine month period in 2001, the
Partnership had trading profits comprised of $1,371,499 in realized gains on
closed positions, ($3,499,778) in net change in unrealized gains/losses on
open positions and $846,030 in interest income.
During the nine months ended September 30, 2002, most of the gains incurred
by the Partnership were generated from financials and foreign currencies.
In January 2002, trading was unprofitable for tropicals and financials. The
Partnership recorded a loss of $19,891 or $3.48 per unit. For the same
month in 2001, trading was profitable in financials and foreign currencies.
The Partnership recorded a gain of $513,388 or $94.99 per unit. In February
2002, the Partnership was unprofitable in all the market sectors. The
Partnership recorded a loss of $5,332,606 or $923.53 per unit. For the same
month in 2001, the Partnership was unprofitable in metals, financials and
foreign currencies. The Partnership recorded a loss of $406,588 or $76.93
per unit. In March 2002, energy and financials produced most of the gains.
The Partnership recorded a gain of $3,702,128 or $653.84 per unit. For the
same month in 2001, foreign currencies produced most of the trading gains,
in addition to the gains in agriculture and energy. The Partnership
recorded a gain of $1,387,209 or $275.68 per unit. In April 2002, trading
was most unprofitable in financials and tropicals. The gains in foreign
currencies failed to offset these losses. The Partnership recorded a loss
of $1,510,092 or $263.55 per unit. For the same month in 2001, trading was
most unprofitable in tropicals and foreign currencies. The gains in energy
and financials failed to offset these losses. The Partnership recorded a
loss of $2,146,681 or $423.24 per unit. In May 2002, trading was most
profitable in foreign currencies. The losses in energy did not offset these
gains. The Partnership recorded a gain of $2,038,068 or $358.07 per unit.
For the same month in 2001, the Partnership was most profitable in foreign
currencies. The Partnership recorded a gain of $1,038,798 or $204.94 per
unit. In June 2002, trading was profitable in all market sectors except for
metals. Foreign currencies and financials produced most of the gains. The
Partnership recorded a gain of $7,825,383 or $1,395.60. For the same month
in 2001, trading was unprofitable in foreign currencies and financials. The
Partnership recorded a loss of $3,047,874 or $593.61 per unit. In July
2002, trading was most profitable in financials. The losses in foreign
currencies failed to offset these gains. The Partnership recorded a loss of
$1,430,858 or $286.89 per unit. For the same month in 2001, trading was
unprofitable in foreign currencies, tropicals and energy. The Partnership
recorded loss of $1,552,179 or $294.36 per unit. In August 2002, trading
was most profitable in financials. The losses in foreign currencies did not
offset these gains. The Partnership recorded a gain of $1,294,641 or
$272.28 per unit. For the same month in 2001, trading was profitable in
financials and foreign currencies. The Partnership recorded a gain of
$1,609,783 or $289.42 per unit. In September 2002, trading was profitable
in financials. The losses in foreign currencies did not offset these gains.
The Partnership recorded a gain of $1,537,661 or $326.64. For the same
month in 2001, trading was unprofitable in energy and foreign currencies.
The Partnership recorded a loss of $395,180 or $68.41 Per unit.
11
For the nine months ended September 30, 2002, the Partnership had expenses
comprised of $2,138,560 in incentive fees, $705,400 in brokerage
commissions (including clearing and exchange fees), $398,709 in management
fees and $124,500 in administrative expenses. For the same nine months in
2001, the Partnership had expenses comprised of $686,814 in brokerage
commissions (including clearing and exchange fees), $402,053 in management
fees, $498,003 in incentive fees and $168,758 in administrative expenses.
Brokerage commissions and management fees vary primarily as a result of
changes in net assets under management and quarterly profits. Although
quarterly profits increased during the nine months ended September 30,
2002, as compared to the nine months ended September 30, 2001, there were
no significant changes in the average net assets under management.
Brokerage commissions increased as a result of an increase in
average net assets under management during the nine months ended September
30, 2002 as compared to nine months ended September 30, 2001. The decrease
in management fees, in light of increased quarterly profits, is caused
primarily by the decrease in the general partner's management fee which is
based upon opening net assets for the year. The Partnership had incentive
fee expense for both the periods as trading losses from prior quarters were
recouped. Incentive fees are generated by quarterly profits. Administrative
fees consist primary of legal and other expenses relating to the
Partnership's reporting requirements under the Securities Exchange Act of
1934, as amended.
As a result of the above, the Partnership recorded a profit of $10,936,625 or
$2,004.18 per unit for the nine months ended September 30, 2002, as compared
to a loss of $3,037,877 or $525.89 per unit for the same period in 2001.
Liquidity and Capital Resources
In general, the Advisor trades only those commodity interests that have
sufficient liquidity to enable it to enter and close out positions without
causing major price movements. Notwithstanding the foregoing, most United
States commodity exchanges limit the amount by which certain commodities may
move during a single day by regulations referred to as "daily price
fluctuation limits" or "daily limits." Pursuant to such regulations, no trades
may be executed on any given day at prices beyond daily limits. The price of a
futures contract occasionally has exceeded the daily limit for several
consecutive days, with little or no trading, thereby effectively preventing a
party from liquidating its position. While the occurrence of such an event may
reduce or eliminate the liquidity of a particular market, it will not
eliminate losses and may, in fact, substantially increase losses because of
the inability to liquidate unfavorable positions. In addition, if there is
little or no trading in a particular futures or forward contract that the
Partnership is trading, whether such liquidity is caused by any of the above
reasons or otherwise, the Partnership may be unable to liquidate its position
prior to its expiration date, thereby requiring the Partnership to make or
take delivery of the underlying interests of the commodity investment.
The Partnership's capital resources are dependent upon three factors: (a)
the income or losses generated by the Advisor; (b) the money invested or
redeemed by the limited partners; and (c) the capital invested or redeemed
by the General Partner.
The Partnership sells limited partnership units to investors from time to
time in private placements pursuant to Regulation D of the Securities Act
of 1933, as amended. As of the last day of any month, a limited partner may
redeem all of its limited partnership units on 10 days' prior written
notice to the General Partner.
The General Partner must maintain a capital account in such amount as is
necessary for the General Partner to maintain a one percent (1%) interest
in the capital, income and losses of the Partnership. All capital
contributions by the General Partner necessary to maintain such capital
account balance are evidenced by units of general partnership interest,
each of which has an initial value equal to the net asset value per unit at
the time of such contribution. The General Partner may withdraw any excess
above its required capital contribution without notice to the limited
partners and may also contribute any greater amount to the Partnership.
12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Partnership is a commodity pool engaged in the speculative trading of
commodity futures contracts (including agricultural and non-agricultural
commodities, currencies and financial instruments), options on commodities
or commodity futures contracts, and forward contracts. The risk of market
sensitive instruments is integral to the Partnership's primary business
activities. The futures interests traded by the Partnership involve varying
degrees of related market risk. Such market risk is often dependent upon
changes in the level or volatility of interest rates, exchange rates,
and/or market values of financial instruments and commodities. Fluctuations
in related market risk based upon the aforementioned factors result
in frequent changes in the fair value of the Partnership's open positions,
and, consequently, in its earnings and cash flow. The Partnership accounts
for open positions on the basis of mark-to-market accounting principles. As
such, any gain or loss in the fair value of the Partnership's open
positions is directly reflected in the Partnership's earnings, whether
realized or unrealized. The Partnership's total market risk is influenced
by a wide variety of factors including the diversification effects among
the Partnership's existing open positions, the volatility present within
the markets and the liquidity of the markets. At varying times, each of
these factors may act to exacerbate or mute the market risk associated with
the Partnership. The following were the primary trading risk exposures of
the Partnership as of September 30, 2002, by market sector:
Interest Rate: Interest rate risk is a significant market exposure of the
Partnership. Interest rate movements in one country as well as relative
interest rate movements between countries materially impact the
Partnership's profitability. The Partnership's primary interest rate
exposure is to interest rate fluctuations in the United States and the
other G-7 countries. The General Partner anticipates that G-7 interest
rates will remain the primary market exposure of the Partnership for the
foreseeable future.
Currency: The Partnership's currency exposure is to exchange rate
fluctuations, primarily in the following countries: Germany, England,
Japan, France, Switzerland, Australia, Canada and the United States of
America. These fluctuations are influenced by interest rate changes as well
as political and general economic conditions. The General Partner does not
anticipate that the risk profile of the Partnership's currency sector will
change significantly in the future.
Commodity: The Partnership's primary metals market exposure is to
fluctuations in the price of gold, silver and copper. The Partnership also
has commodity exposures in the price of soft commodities, which are often
directly affected by severe or unexpected weather conditions. The General
Partner anticipates that the Advisor will maintain an emphasis in the
commodities described above. Additionally, the Partnership had exposure to
energies (gas, oil) as of September 30, 2002, and it is anticipated that
positions in this sector will continue to be evaluated on an ongoing basis.
The Partnership measures its market risk, related to its holdings of
commodity interests based on changes in interest rates, foreign currency
rates, and commodity prices utilizing a sensitivity analysis. The
sensitivity analysis estimates the potential change in fair values, cash
flows and earnings based on a hypothetical 10% change (increase and
decrease) in interest, currency and commodity prices. The Partnership used
September 30, 2002 market rates and prices on its instruments to perform the
sensitivity analysis. The sensitivity analysis has been prepared separately
for each of the Partnership's market risk exposures (interest rate,
currency rate, and commodity price) instruments. The estimates are based on
the market risk sensitive portfolios described in the preceding paragraph
above. The potential loss in earnings is based on an immediate change in:
The prices of the Partnership's interest rate positions resulting from a
10% change in interest rates.
13
The U.S. dollar equivalent balances of the Partnership's currency exposures
due to a 10% shift in currency exchange rates.
The market value of the Partnership's commodity instruments due to a 10%
change in the price of the instruments. The Partnership has determined that
the impact of a 10% change in market rates and prices on its fair values,
cash flows and earnings would not be material. The Partnership has elected
to disclose the potential loss to earnings of its commodity price, interest
rate and currency exchange rate sensitivity positions as of September 30,
2002.
The potential loss in earnings for each market risk exposure as of
September 30, 2002 was approximately:
Trading portfolio:
Commodity price risk $ 280,500
Interest rate risk $ 345,000
Currency exchange rate risk $ 183,000
Item 4. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
There currently is no established public trading market for the Limited
Partnership Units. As of September 30, 2002, approximately 4,707.5769
Partnership Units were held by 271 Limited Partners and the General Partner.
All of the Limited Partnership Units are "restricted securities" within the
meaning of Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), and may not be sold unless registered under
the Securities Act or sold in accordance with an exemption therefrom, such
as Rule 144. The Partnership has no plans to register any of the Limited
Partnership Units for resale. In addition, the Partnership Agreement
contains certain restrictions on the transfer of Limited Partnership Units.
Pursuant to the Partnership Agreement, the General Partner has the sole
discretion to determine whether distributions (other than on redemption of
Limited Partnership Units), if any, will be made to partners. The
Partnership has never paid any distributions and does not anticipate paying
any distributions to partners in the foreseeable future.
From January 1, 2002 through September 30, 2002, a total of 1,067.8442
Partnership Units were redeemed for the aggregate net redemption amount of
$6,261,783. Details of the net subscriptions and redemptions of these
Partnership Units are as follows:
Date of subscriptions/ Net amount of
redemptions subscriptions/redemptions
----------- -------------------------
January 2002 $ (238,712)
February 2002 $ 247,721
March 2002 $ (470,588)
April 2002 $ 293,877
May 2002 $ (184,326)
June 2002 $ (516,011)
July 2002 $ (3,653,792)
August 2002 $ (1,428,466)
September 2002 $ (311,486)
Investors in the Partnership who subscribed through a selling agent may
have been charged a sales commission at a rate negotiated between such
selling agent and the investor, such sales commission in no event exceeded
4% of the subscription amount. All of the sales of Partnership Units were
exempt from registration pursuant to Section 4(2) of the Securities Act and
Regulation D promulgated thereunder.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The General Partner is not aware of any pending legal proceedings to which
the Partnership or the General Partner is a party or to which any of their
assets are subject
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WILLOWBRIDGE FUND L.P.
Date: November 14, 2002 By: Ruvane Investment Corporation
Its General Partner
By: /s/ Robert L. Lerner
--------------------------------
Robert L. Lerner
President
15
THE WILLOWBRIDGE FUND, L.P.
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Robert Lerner certify that:
1) I have reviewed this quarterly report on Form 10-Q of The Willowbridge
Fund, L.P.
2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date") and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
16
5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function);
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date November 14, 2002
/s/ Robert L. Lerner
- -------------------------------------------------
President of Ruvane Investment Corporation,
the general partner of The Willowbridge Fund, L.P.
17